Friday 12 April 2013

Market ends up in the green amidst low activity...


The ASI gained 73.94 points WoW to close at 5,839.88 points (1.3%), whilst the S&P SL20 Index gained 21.01 points WoW to close at 3,333.54 points (0.6%). 

Indices benefited mainly on the back of the gains made by Vallibel One (8.6% WoW), John Keels Holdings (0.6% WoW), Distilleries Company of Sri Lanka (2.4% WoW), Ceylon Guardian Investments (8.7% WoW) and Nestle Lanka (1.1% WoW).

The final week in the run up to the Sinhala & Tamil New Year saw a marked decline in investor activity compared with the previous weeks at activity at the Colombo bourse as indicated by low turnovers and volumes. Both indices trended upwards for most of the week and ended up in the green. 

This maybe a response to the positive sentiment expressed by the ADB in its economic outlook for the economy which also projected a GDP growth rate of 6.8% and 7.2% for 2013E and 2014E respectively. 

Interest in the Colombo bourse may be sustained given the Central Bank’s objective of lowering borrowing costs by May-June which would make equities more attractive from a valuation perspective. 

However, the ADB cautions that the BOP deficit and the increasing share of foreign borrowing poses the most significant challenge towards the future growth prospects of the economy. 

Banking & Finance sector counters continued to command institutional interest with firms such as Hatton National Bank, Central Finance Company and Pan Asia Bank benefitting from crossings over the week.

Furthermore, Panasian Power, Free Lanka Capital Holdings, Dialog Axiata, Seylan Merchant Bank (Non-Voting) and Seylan Merchant Bank topped the list in terms of volume traded during the week.

The week saw foreign purchases amounting to LKR 885.3 mn whilst foreign sales amounted to LKR 230.8mn. Market capitalisation stood at LKR 2,237.3bn, and the YTD performance is 3.5%.

Conclusion:

Bourse fairly buoyant despite the festive season
The mood at the Colombo bourse remained fairly buyout despite the upcoming festive season, driven by high institutional and foreign activity. The performance of the indices was especially a welcome on the heels of the Central Bank’s assessment of the economy for 2012 as well as the positive comments mentioned in the ADB’s Asian Development Outlook for 2013.

World stocks also demonstrated strong performance lifted by a surprise drop in US unemployment figures and the Bank of Japan’s aggressive monetary policies in an attempt to beat continuous deflation witnessed in the country. Further, the improvement witnessed in the China’s imports of key commodities in March also propelled the world stock markets to high levels. Reaffirming this, MSCI world index gained 2.5% WoW to close at 1,462.8 as at Thursday reaching a 5 year high, while the S&P 500 also climbed to record levels during the week since 2007. Most frontier markets also made gradual recovery in tandem with the movement in the world indices. Furthermore, the performance of equities has made the investors to shift away from safe heaven assets.

In the context of Colombo Bourse, investor’s focus in the coming weeks would increasingly turn towards 1QCY2013 earnings results of the corporations. Furthermore, treasury secretary’s statement regarding the possible easing of market interest rates from May and June 2013 is likely to draw investor attention more towards the bourse.
Source: Asia Wealth Management Research

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